How Wanxiang could revive electric carmaker Fisker

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A Delaware judge will decide today whether to accept Wanxiang Group’s outsized $149 million bid for bankrupt electric-car startup Fisker Automotive. The chances are that Judge Kevin Gross will OK the acquisition, which far surpasses the original bid, and will thus create fascinating competition for style- and image-conscious Tesla Motors.

At first, Li seemed to enjoy the advantage because in November, he paid $25 million to acquire a $168 million loan to Fisker from the US Energy Department. Li and Fisker said that was the first step to a no-further-cash deal for the carmaker’s assets. Essentially, Li would get Fisker for having bought off the federal loan.

But Judge Gross balked after Fisker’s committee of unsecured creditors made allegations of insider dealing by Li. Gross decided to open up the bidding to a public auction that would include Wanxiang’s Lu.

The Chinese billionaires then went to war

Both men began by pledging to quickly resume production of the $100,000 Fisker Karma and finish developing its $50,000-$60,000 second-generation Atlantic (pictured above). Lu’s pledge to develop the model was contained in a Jan. 8 court filing (pdf).

As for cash payment, Li offered $55 million as his opening bid, seriously sweetening the original deal with $30 million in cash. But Lu topped him, and rapid-fire counter-bidding followed—19 rounds in all over three days. Lu was declared the winner on Feb. 14, and Li appears to be standing down without public protest.

Li’s final, losing bid is not known, but what appears to have made Lu stand out was his deep-pocketed willingness to bail out unsecured creditors: Under the terms of the auction, Li will get back his $25 million, and the rest will go to pay off these creditors.

Lu had an additional strategic advantage, which is his purchase a year ago of bankrupt A123 Systems, which was Fisker’s lithium-ion battery manufacturer. That validated his promise to bring back the Karma fast.

Now Lu has a fix-‘er-up on his hands

Pin Ni, who is Lu’s son-in-law and head of Wanxiang’s US division, told Quartz that the company is withholding comment until after Judge Gross’s decision. But if Fisker is to make it under Wanxiang, it probably won’t be because of the Karma. The car is indisputably gorgeous, but Consumer Reports savaged almost everything else about it, more or less calling the Karma a cramped and poorly designed tank. Popular Science did not think much better of it.

Bob Lutz, the retired father of the Chevy Volt, saw merit in focusing on the Karma’s looks and scrapping the electric innards entirely. He created a business in which he converted Karmas into souped-up, gasoline-driven sports cars propelled by a 636-horsepower Corvette engine. He called them the Destino and sold them for $200,000 each. For a short time last year, Lutz and his Destino were officially part of Li’s bid for Fisker, but he was out of the picture by the time of the auction.

Wanxiang might succeed if it can move some plug-in Karmas out the door while developing and launching the less-expensive, more mass-market Atlantic. Leveraging A123, it could forgo profit on the batteries, thus allowing it to safely lower the price. After two or three years, it could launch an initial public offering, John Voelcker, editor of Green Car Reports, told Quartz. “Based on the track record of Tesla, people might be willing to buy stock in an independent Fisker,” he said.